Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 251 - RENTAL MOTOR VEHICLE AND TOUR VEHICLE TAX
Subchapter 4 - IMPOSITION OF RENTAL MOTOR VEHICLE SURCHARGE TAX
Section 18-251-2-02 - Surcharge tax on rental motor vehicles or vehicles; computation of tax

Universal Citation: HI Admin Rules 18-251-2-02

Current through November, 2023

(a) For purposes of this chapter, "day" means a twenty-four hour period of time, which shall be computed from the time that the motor vehicle or vehicle is rented or leased.

Example: Ms. Visitor rents a car for a day. She picks up her car at 9:00 a.m. on Monday and returns it to the car rental station at 8:59 a.m. on Tuesday. There is a surcharge tax at the rate set forth in section 251-2, HRS, for the one-day rental.

(b) For purposes of this chapter, "any portion of a day" means one minute or more of a twenty-four hour period of time that the motor vehicle or vehicle is rented or leased; provided that the computation of time shall not include any incidental grace period allowed by a lessor. The grace period shall be without any additional rental charge, overtime or service fee, or any other charge or fee or waiver relating to a delayed return of a vehicle.

Example:

Mr. Businessman travels from Oahu to Maui for business and rents a car from ABC Rental on Maui from 8:00 a.m. to 12:00 p.m. when Mr. Businessman returns to Oahu. At 1:00 p.m. ABC Rental rents the same car to Ms. Visitor until 8:00 p.m. Assuming ABC Rental is not a car-sharing organization, ABC Rental is subject to the rental motor vehicle surcharge tax for the daily rate for each portion of a day's rental. In other words, rental motor vehicle surcharge tax is due for two days total rental.

Example:

Mr. Tourist travels to Maui and rents a car. He picks up his car at 11:00 a.m. on Friday and returns it to the car rental station at 11:01 a.m. on Monday. The rental car company charges Mr. Tourist the rental rate for three days and one hour. Mr. Tourist has rented the car for three days and a portion of a fourth day; therefore, rental motor vehicle surcharge tax is due for four days total rental.

Example: Ms. Mover is moving to a new house and rents a truck for a day. She picks up the truck at 9:00 a.m. on Wednesday and returns it to the truck rental location at 9:10 a.m. on Thursday. The rental company has a grace period of fifteen minutes and only charges Ms. Mover for one day's rental. Ms. Mover has rented the truck for one day, and rental motor vehicle surcharge tax is due for one day total rental.

(c) The substitution of a motor vehicle or vehicle with another motor vehicle or vehicle shall not incur an additional rental motor vehicle surcharge tax amount for a day or portion of a day if:

(1) The substitution is made on the same rental contract or agreement;

(2) The rental or lease period is uninterrupted, continuous; and

(3) If the rental or lease period is longer than one day, the rental or lease period shall occur over consecutive days.

When there is a substitution of vehicle, the burden is upon the lessor to show that the substitution is proper and not a surcharge tax avoidance scheme and subject to the rental motor vehicle surcharge tax.

Example:

Mr. Sales flies to Oahu for a one-day trip. He rents a car at the airport and drives off to his meeting in Kaaawa. Before he gets too far, Mr. Sales realizes that the car is not in very good condition. He decides to return to the airport station and exchange the car for another one in proper working condition. The second car is a substitute for the first car, therefore, the rental motor vehicle surcharge tax is due for one day total rental.

Example:

To ease traveling to neighbor islands for its customers, ABC Rentals (ABC) has a "one-stop 7-day islandhopping" special: a customer signs one rental car contract; pays the rental fee for seven days; and may pick up a car from any of ABC's business locations on any island during that time period. Ms. Visitor decides on the special rate. She picks up a car at the airport on Oahu at 8:00 a.m. on Monday; returns the car to the Oahu station at 8:00 a.m. on Tuesday; and flies to Molokai, picking up a car there at 9:00 a.m. At 5:00 p.m., she returns the car to the Molokai station and flies to Maui, picking up a car at 6:00 p.m. Ms. Visitor spends the rest of the week on Maui, returning the car to the Maui station at 7:55 a.m. the next Monday. Ms. Visitor actually used three different cars on Tuesday. The second and third cars she used are substitutes for the first car; thus, the rental motor vehicle surcharge tax is due for seven days' total rental.

(d) The rental motor vehicle surcharge tax due on a motor vehicle or vehicle which is not returned to the lessor or is abandoned by persons renting or leasing the motor vehicle or vehicle shall be calculated on:

(1) The days or portion of days set forth in the rental contract or agreement; or

(2) The days or portion of days for which the person renting or leasing the motor vehicle or vehicle is actually charged if that number of days is greater than set forth in the rental contract or agreement.

Example:

ABC Cars rents a car to Jane and John Doe. The rental contract states that the car will be rented from Monday 9:00 a.m. and must be returned by Wednesday 9:00 a.m. Because they are late for their flight back to the mainland, instead of returning the car to the car rental station, the Does leave the car at the airport terminal. The car is towed away by airport security. ABC does not locate the car until the following Monday at 11:00 a.m.; thus, the car is gone from the car rental station for a total of eight days. The surcharge tax, however, is only calculated on the two days set forth in the Does" contract.

(e) The status of the person renting or leasing the vehicle shall have no bearing on the imposition of the rental motor vehicle surcharge tax. Motor vehicles or vehicles rented or leased to the following persons are nevertheless subject to the rental motor vehicle surcharge tax:

(1) Persons which are nonprofit charitable or educational corporations, associations, or similar organizations exempt from tax under the federal Internal Revenue Code of 1986, as amended; and

(2) Persons who present cards or certificates stating that the holder is exempted from state sales taxes.

Example:

VIP Rentals (VIP), rents a car to a customer who is a staff member of a foreign embassy. The staff member presents a diplomatic card stating: "The bearer of this card shall not be subject to state sales taxes under treaty agreements between the United States and the staff member's country." The waiver from payment of tax stated on the card does not apply here; the incidence of tax falls on the rental agency, not the customer. The rental car agency is not prohibited from passing on the cost of the rental motor vehicle surcharge tax to the customer.

(f) The designation by the lessor of:

(1) The rental or lease period; or

(2) Consideration received from the rental or lease of a motor vehicle or vehicle to a specific time period;

is not controlling and may not necessarily determine the number of days a motor vehicle or vehicle is rented or leased.

Example:

DEF Rental Cars (DEF) has a variety of rental fees, depending upon the number of days a customer rents a vehicle. There is an hourly rate, daily rate, weekly rate, and monthly rate. DEF also has a special business rate. If the business traveler rents a car for five weekdays, the business traveler may keep the car over the weekend without an additional rental charge. When DEF rents a car to a customer for a week under the special business rate and the car is kept for seven days, the car is subject to the rental motor vehicle surcharge tax for all seven days.

[Eff 1/27/92] (Auth: HRS §§ 231-3(9), 251-15(b)) (Imp: HRS § 251-2)

[Am 4/2/2016]

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